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ETHIOPIA WITNESSES A RENAISSANCE

Africa’s fastest growing economy is experiencing an economic revival, with strong international interest and ongoing infrastructure projects set to change Africa.

May 2015

Located in the Horn of Africa, Ethiopia is Africa’s oldest independent country and second largest in terms of population. Apart from a five-year occupation by Italy, it has never been colonised and as a result served as a symbol of African independence throughout the colonial period.

But the country has had its share of challenges. A generation ago Ethiopia was stricken by a famine that shocked the world. Yet today, Addis Ababa’s skyline has changed drastically, proof that the country is experiencing rapid economic growth, an inflow of Foreign Direct Investment (FDI) and several ongoing infrastructure projects that are boosting the country’s economic potential.

ECONOMY

As the fastest growing economy in Africa, Ethiopia currently stands at a pivotal point as foreign investors seek investment opportunities in the largest landlocked country in the continent. According to the country’s finance ministry, Ethiopia’s economic growth is projected at 11% per annum for 2015.

Between 2013 – 2014 Ethiopia’s GDP growth was about 8.2%, and it was the only African country to move at a pace comparable to the East Asian tigers (Hong Kong, Singapore, South Korea and Taiwan), and to do so without a hydrocarbons boom or a huge mining sector.

The country’s growth is principally attributed to aggressive government projects aimed at achieving its Millennium Development Goals (MDGs) in order to become a middle income status country by 2025.

According to the World Investment Report by the UN, Ethiopia registered a significant increase in its FDI stock – the amount invested from abroad held within the economy. FDI inflow reached USD 953 million last year up from USD 279 million in the previous year.

“With a continuing significant increase of the inflow [in 2014], the robust economic growth and the growing middle class of Ethiopia, has contributed to the attractiveness of Ethiopia as a preferred destination of cross boarder investors,” said Bruno Casella an economist from UNCTAD (United Nations Conference of Trade and Agreement).

According to the World Bank, “Ethiopia is attracting significant investor interest from emerging economies like China, India, and Turkey,” however it warns “in order to convert these interests into actual investments, Ethiopia must be more competitive by considerably reducing logistics cost and time.”

Looking at real estate, economic conditions make for an apt property market. Peter Welborn, Head of Africa at Knight Frank says that while the country may be underdeveloped because it is a closed market, is witnessing high levels of interest.

MARKET DRIVERS

Home to the African Union headquarters, the headquarters of the United Nations Economic Commission for Africa and a number of other continental and international organisations, Addis Ababa is often referred to as the political capital of Africa.

Earlier this year, Knight Frank’s Wealth Report predicted that Ethiopia’s capital Addis Ababa may soon become a global financial capital and haven for the super-rich. According to the property consultant the population of high-net-worth individuals in Addis Ababa has nearly doubled since 2007 and is expected to double again by 2024.

Also driving growth in the property sector, according to Knight Frank is an improving transparent real estate market, after the introduction of a sovereign rating, a step that opens the door for international capital markets and highlights the country’s profound turnaround.

“We are also seeing the opening up of the market to retailers and manufacturers. In addition to this the country has a population of 90 million, making it the second most populous country in Africa. Adding to this there is also a relatively high purchasing power,” says Welborn.

Welborn says that Addis Ababa’s position as an important air hub is another driver. Ethiopian Airlines is one of the largest airlines in Africa and has doubled in size since the beginning of the decade.

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